by Don More with Matthew Cohen and Francesca Bartolomey
“Flank left! Flank left!”
“Enemy on your right!” These are the outbursts typical of a gamer in Counter-Strike; however, gaming has gone far beyond the ‘traditional’ youngish, mostly male audience to include an amazing 72% of the entire U.S. population, up from 64% in 2006. Make no mistake about it – it’s not your parents’ Atari. Leaps in technology, bandwidth, and processing power have extended gaming to new uses, audiences, and age groups. Applications experiencing great growth include education, training, and rehabilitation. Gamers are a critical market that advertisers cannot afford to ignore. NPD Group reports that in 2007, the gaming sector alone generated about $19 billion in revenues in the U.S. representing a 40% increase from sales in 2006. Participation in online gaming has grown to 42% of the population. Of all online gamers in 2007, 90% used a PC (or laptop) to enter the virtual gaming network, while 19% reported using their console (such as Xbox 360 and PlayStation 3).* And not only are more users than ever before playing games online, but they are also becoming more avid gamers. NPD Group reports that 13% of online gamers spend 20 hours or more per week playing games online. Expect web-enabled handhelds of the Nintendo DS or PSP variety to further increase market penetration and engagement in the medium. In addition to entertainment, games are increasingly a component of education. For example, LeapFrog’s products (as well as similar lines by Hasbro and Mattel) are designed to encourage development and basic learning in children as young as just a few months old. The benefits of games that are introduced into a learning environment are seen in older students as well. Research conducted on the effect of using games to aid students in learning math showed that students using the games earned an average of 4.3 more points on a math test than students in a control group. Another growth area in gaming leverages technological advances that enable physical involvement of the user in video games, a phenomenon colloquially dubbed “wiihabilitation.” War veterans, the elderly, and other patients recovering from injury are using the Nintendo Wii in order to enhance (and reduce the burden of) rehabilitation therapy. Employers are seeing the benefit of games in workplace training as well. While many productive hours have probably been lost to the likes of Tetris and Solitaire over the years, more companies utilize online games to train employees better. M&A activity reflects the market opportunity. Hot on the heels of last year’s $18.9 billion deal combining Vivendi and Activision, video gaming titan Electronic Arts made a $2 billion bid for rival Take-Two Interactive (the creator of the hugely successful Grand Theft Auto series) earlier this year. Additional gaming deals announced this year are shown below. Expect more activity to follow. *The overlapping 9% consists of respondents who access online games via both their computer and console. 2008 Gaming M&A Transactions  | 
